Monday, November 4, 2013

Management indicated that gas supply has improved significant for the fourth quarter ended Aug 2013. TNB has been receiving sufficient supply of gas for generation purposes thus far (Nov 2013), since the regasification terminal in Melaka commenced operations in May 2013.

As a result, reliance on alternative fuel like hydro and oil and distillate has reduced on the whole for FY2013. The trimming down of the usage of alternative fuels would serve as a means of cost savings for TNB.

It is understood that even in the wake of a tariff adjustment via the fuel cost pass through mechanism, only coal prices and regulated gas are taken account, when such adjustments are made. Any LNG supplied to TNB and usage of oil and distillate would not be imputed into the tariff adjustments as such costs would not be passed on to consumers. Hence, management had indicated that the fuel cost compensation initiative will remain, in which the government, Petronas and TNB will share out the incremental LNG cost, which is currently (Nov 2013) at the market price of approximately rm42 per mmBtu, on the basis of a one third cut each. In preparing for future gas supply shortages cropping up, TNB has started to explore obtaining gas supply from third party sources instead of relying on Petronas as the sole supplier.

Despite the lack of updates on the FCPT mechanism and incentive based regulation framework during the Budget 2014 session, management has reinstated its confidence that these incentives will be announced by the end of 2014 and commence in early FY2014.

Management has also reiterated that both the FCPT and IBR measures would augur well for TNB as fuel cost fluctuations would be captured and passed on to consumers via a tariff adjustment.

The GST will be implemented from 2015, and electricity was not identified to be GST exempt. Only the first 200 units of electricity consumed will be spared from GST.